Specialty Lines Markets
Special events, promotions and weather
Creativity is the key
By Phil Zinkewicz
How many of us can remember the little grocery store on the corner that, usually around Easter, held a contest for its regular customers? A large jar of jellybeans was placed on the counter right by the cash register. If you could guess the number of jellybeans in that jar, you won a prize of some kind—five dollars worth of grocery purchases, for example.
Then there was the Miss Rheingold contest. In New York during the 1940s and ’50s, women would vie for the title. The public would vote and if your choice won, you had the satisfaction of knowing you had picked the winner. That was it.
Well, today more innovative promotional contests abound and the prizes are a bit more than a few dollars worth of groceries or self satisfaction.
A little over a year ago, the Miller Brewing Company launched a Texas Gas Sweeps promotion that gave Texas consumers a chance to drive away with $100,000 in free gasoline. The instant-win game, which ran through February 2008 at participating convenience stores and retailers throughout Texas, also gave consumers the chance to win prepaid gift cards worth $100 each.
This contest was a far cry from a jar of jellybeans, but it is just one example of a growing trend in which companies seek to draw in new customers by sponsoring contests. And the insurance industry is ready to provide the backing.
Prize indemnity
“We’re all familiar with the offer of $10,000 for a hole-in-one at the local charity golf tournament or a new car at a local college basketball game if a fan sinks a half court basket,” says Todd Overton, account manager at SCA Promotions.
“But today, companies are recognizing the benefits of using promotions and contests to attract customers and drive them towards their stores and their products or to get them to attend sporting events. GEICO recently held a contest that promised $10,000 to the winner because it wanted to get people to register for paperless billing. GEICO managed to increase its paperless billing registrants by around 10% to 15%.”
Overton says these contests are called contingent products promotions, which means there might not be a winner of the big prize; but if there is a winner, the insurance company pays under a prize indemnity insurance contract. He says there is little negative reaction on the part of customers if no one wins the big one as long as the contest is set up so that there is a possibility that someone can win. All prizes that are won are backed by an A.M. Best rated company.
Lauren Jones of Coverage Guarantee Association describes the current prize indemnity market as “stable.”
“The questionable economy has caused some companies to cut their budgets for promotions,” she says. But she adds that CGA is still heavily involved in promotional contests. “We recently created a boot-tossing contest at a rodeo for which the prize was $25,000 for whoever could toss his boot from the stands into a barrel in the middle of the rodeo ring,” she says.
And, in addition to the usual golf hole-in-one contests and golf charity events, CGA has been creative in other areas, she says.
The Sturdivant Island Tuna Tournament has been held annually since 1998. In 2007 the fishermen readied their gear in hopes of setting a new Maine record for a prize of $25,000. One of the event sponsors was Harry’s Honda and Mitsubishi, handled by CGA.
In the area of baseball, CGA has created the “Perfect Pitch” contest where a randomly selected fan walks to the pitcher’s mound and is given the chance to pitch a baseball through a target set up at home plate.
Special events
Another area that is still ripe for specialty E&S underwriters is special events coverage. Eric Taylor, vice president of the Richmond, Virginia-based James River Insurance Co., which specializes in underwriting large risks such as auto shows, concerts and large street festivals, says the market for special events coverage is relatively stable. “There are various exposures associated with special events, and underwriters tend to have their own comfort levels. They all have certain areas where they want to participate,” he says.
Taylor says that one area of exposure that could prove troublesome in the next few months is non-owner automobiles. “With the Democratic and Republican Conventions coming up, there will be tons of non-owner autos out there.”
Other than that, according to Taylor, coverages are readily available in the special events arena if you know the underwriters to approach. James River Insurance Co., for example, specializes in general liability and property coverages, but it does not write event cancellation.
When underwriting special events insurance, Taylor says, there are a number of things to consider such as whether the event has taken place before, whether it is being held indoors or outdoors, how many people will be attending the event, and whether alcohol will be served.
If the event is being held outdoors, that brings up the issue of weather insurance. Traditionally, when an outdoor event is being planned, brokers and agents usually approach insurance companies that write the coverage. However, there is a new wrinkle in the weather coverage market.
Weather coverage
WeatherBill is a San Francisco company just under two years old that basically offers weather futures contracts to clients who seek to protect themselves against inclement weather that could hurt their businesses.
The company was founded by David Friedberg, CEO, and Siraj Khaliq, CTO, two former employees of Google. Their team is composed of computer scientists, mathematicians, marketers and business developers from leading Silicon Valley and Wall Street institutions.
Relatively new to WeatherBill is Christine Ingraham, a weather insurance expert who is sales director for the company’s new East Coast branch in Georgetown, Massachusetts. Ingraham has more than 20 years’ experience in the insurance industry, 12 of which were spent in weather insurance.
“WeatherBill contracts are not insurance, but financial instruments used by businesses to manage weather risk,” says Ingraham. “When the covered weather condition specified in the contract occurs, the specified dollar amount will be paid in full. Unlike insurance, there is no need to file a claim or demonstrate a loss to receive payment. Payment is made automatically at the end of the term and a check is typically received within three to five business days.”
Ingraham says that WeatherBill is partially owned by two of the largest private equity funds in the world—New Enterprise Associates and Index Ventures. Both have invested significant capital into WeatherBill offering financial stability and strength to the organization, she says. In addition, Nephila Capital Ltd., a leading fund manager specializing in reinsurance, completed an investment in WeatherBill in conjunction with the reinsurance relationship between the two companies.
“We are very excited to introduce WeatherBill contracts to the agency system as alternatives to weather insurance,” Ingraham says. “Agents and brokers need to know that although we’re new in the marketplace, we’re poised to offer effective, leading edge tools to produce weather contracts.” *